Worst business decisions ever

Semi-sequel to “Worst advertising campaigns ever”. What are the worst business decisions you’ve ever seen?

Blockbuster passing on Netflix has to be up there.

New Coke.

Things ultimately worked out fine for them. Fantastic, even. But still, it was a horrible decision made for absolutely no reason.

Back in 1998, two individuals, Larry Page and Sergei Brin offered to sell their little startup to AltaVista for $1 million so they can resume their studies at Stanford. No sale!

Robert Wayne, little-known third co-founder of Apple, sold his 10% stake in the company for $800.

Both of these assume that these companies would’ve still grown into the powerhouses they became, despite being controlled by a completely different party.

My parents told me about a business that made a pretty stupid decision once. It was a chain of highway gas stations and diners. They had distinctive coffee mugs with their branding on them, and my parents asked if it was possible to buy one as a souvenir. The staff told, them, “We used to sell them, but we couldn’t keep them in stock, so we stopped selling them…”

So, yeah, good business sense there, stop selling an incredibly popular item. Wouldn’t want to go making a profit, or something, would you?

Just buying the companies and killing them would have neutralized them as competition.

I think the French got the short end of the deal in selling the Louisiana territory, lost all claims to anything in North America. Even if they had just held on to New Orleans and the delta region they could have had a choke hold on commerce in the new world.

Russians lost not only money, but a foothold in North America when it sold Alaska.

And then there is every deal the Native Americans made with the US government, they took the biggest lost possible. But that one probably doesn’t count because it was made at gunpoint, the other two were free trade deals, even though technically the land was the Native Americans to begin with.

Xerox invented the mouse-driven personal computer. Kodak invented the digital camera. Both decided that the costs of investing in these would cripple their current businesses. They were probably right, but in hindsight…

Back in the summer of ‘95, I had a guy that was sort of a mentor to me tell me about two up and coming businesses that he had invested in where he’d be happy to make introductions and help me find a job. Of the two, one sounded really interesting, and turned out to be a great job that I stayed at for seven years. The other place wasn’t interesting to me because who was ever going to buy books on the internet, anyway?

I have a hard time with listing not buying a company that was later worth millions as a bad business decision because for every one of those there is decision to buy a company that cost millions. It seems like a crapshoot. Ones like Xerox and Kodak are different because those were decisions to not bring your company into the modern age.

An acquaintance of mine bragged about the savvy business move he made, buying a house nearby that was in foreclosure. It needed work, but he had recently retired and was handy enough to do all the labor himself. He was gonna make a fortune.

On the first day of his project he sustained a fairly serious injury involving his back. There was no way he was going to be able to remodel the house and he’d already ordered lumber/carpeting/copper/etc, so he tried to find laborers who would follow his orders yet work for cheap.

Things did not go well. He hired/fired people weekly. Still, eventually he was ready to put the house on the market. That’s when he had the septic tested and it failed. Repeatedly.

He hired an excavator to build a sand mound, which led to him being sued by the owner of an adjoining property. He lost, but eventually got the sand mound completed and the septic approved.

The house has been on the market awhile now with zero interest so far. I feel bad laughing. A little.

In the case of Russia and Alaska, the territory was sparsely populated and too costly and far away to defend. The Russians knew the British could just march over from Canada and take it if they wanted to so they tried to get some money out of it by selling it to the US.

There was a book about the beginnings of Xerox called The Billions Nobody Wanted. After Chester Carlson invented xerography, he went to a bunch of companies like Kodak and IBM and they all passed. A small company in upstate NY jumped on it and it became Xerox. Which was a major company in just a few years.

I always thought that there should have been a followup The Billions Xerox Didn’t Want regarding the stuff that PARC came up with. Workstations with a GUI connected to this thing called “Ethernet” with devices like “laser printers” and file storage connected. (I actually used Xerox Altos back then. Amazing boxes.)

But Xerox had gotten burned with they bought SDS (renamed XDS) which made clone IBM 360s. So they let others fly with it. Key people from the printer group went out and formed a company called “Adobe” for example.

The quote I heard back then: “If Xerox marketed the Alto, there would be no Apple.”

The tech field is full of such stories.

When IBM was developing its PC they first went to one company to make a deal for a version of CP/M and that company passed. Then they went to Microsoft who made a deal, but had no OS. So they went to a guy who had a version of QDOS and bought a license from him without saying who they really needed it for. Later buying the whole thing. All for incredibly little. That became PC-DOS 1.0 and MS started making Real Money.

Wow, I don’t think I knew this one. Apple today has a market cap of about $2.6 TRILLION. He had good reasons at the time but sheesh…

I guess that was not Kum&Go.

I’d like to think the worst business decisions were the corporate raiders like Carl Ichan, Larry Lampert and the rest buying and dismantling storied American companies like TWA and Sears. But of course, the raiders made money, so from their point of view, they were pretty good decisions.

Maybe the worst decision was Lehman Brothers deciding not just to get into the mortgage market, but to bet a lot of its assets on subprime mortgages. When the subprime market went bust, Lehman Brothers ended up with the largest bankruptcy in U.S. history.

And it gets worse. Kodak spent a whole lot of money developing the Advantix system. I worked on a lot of the patent applications for this, and there were a lot of them. They were essentially trying to make film photography as easy as digital photography, right at the time digital was starting to take off. They completely misread the entire industry.

In hindsight, yeah, New Coke was a terrible business decision. But it certainly wasn’t made for “no reason”. Pepsi’s sales were increasing, and Coke’s executives were worried Pepsi would soon eclipse them. They believed they needed a drink that could better compete with Pepsi, especially among younger people. They did a lot of research that showed most people liked the taste of New Coke better than both Pepsi and original Coke. I’m sure, as they say, that New Coke seemed like a good idea at the time.

McDonald’s Arch Deluxe.

The idea was to sell a burger for parents to eat instead of the usual stuff. They went to a lot of trouble to come up with a recipe.

Then the ads all featured kids eating it.

Seemed to me that Kodak didn’t really understand how digital photography was going to change things. IIRC even when digital was firmly going forward, Kodak misunderstood it and leaned hard into cameras and printers that had some kind of integration involved.

Which might have worked, but smartphones and text messages seem to have put a real stake through the heart of printers for photo sharing, and not being able to easily print from a smartphone made that doubly bad for the printers.